Thank you for your reply,
You know, who knows what it is. I tried what you said and nothing is selected.
I opened a new project and did the same thing and it worked properly just like it should.
Then I went around it by going back into my original file and using Place External Drawing (the same dwg file) command instead of x-ref and it worked perfectly. So the only difference is that if the subs change their background I will have to update mine. Not a big deal since it is a small project and I don't expect to be changing anything soon.
Not worth wasting time.
Thank you again for your help!